Content Editor, Dunham | 2025 ThinkAdvisor Luminaries Award Winner | 2026 Wealthies Finalist, Thought Leader of the Year | Macroeconomics, markets, geopolitics & global trends
“Be greedy when others are fearful” means being willing to invest when pessimism has pushed others away. But falling prices alone don’t make an investment a bargain. This guide explores five tools—from CNN’s Fear & Greed Index and the VIX to valuation measures, rules-based investing, and cash planning—to help advisors build a framework before emotions take over.
Key Takeaways
“Be greedy when others are fearful” is a principle - but not a strategy without a framework
Market sentiment can be measured using tools like CNN's Fear & Greed Index, VIX, and valuation metrics
Extreme fear often creates opportunity - but rarely signals perfect timing
Systematic approaches can remove emotional decision-making during volatile periods (DunhamDC)
The edge isn’t reacting to fear - it’s deciding how to act before it arrives
"Be fearful when others are greedy, and greedy when others are fearful."
It's arguably the best investment advice ever put into a single sentence. It’s been printed on posters, repeated in interviews, and turned into a slogan for contrarian investing.
And yet, every time markets actually fall, investors tend to do the exact opposite.
Why?
Because it’s human nature.
Talking about buying when everyone thinks the sky is falling is easy. Actually doing it is something else entirely.
Combines seven market indicators into a sentiment score.
Doesn’t identify the market bottom/top
Buffett Indicator
Compares total stock-market value with GDP.
Doesn’t establish when valuations will change
VIX
Measures options-implied expectations for near-term volatility.
Doesn’t predict market direction
DunhamDC
Adjusts equity exposure using predefined rules.
Can lose money and may underperform a portfolio without the overlay. Increasing equity exposure during a decline can add to losses.
Berkshire’s cash position
Shows liquidity held by one massive company
Doesn’t reveal a complete market forecast
*these tools serve different purposes. Indicators provide market context; DunhamDC is an investment overlay. None guarantees investment results.
How the CNN Fear & Greed Index Works
The CNN Fear & Greed Index measures investor sentiment. It uses seven inputs, combining them into a single 0–100 score. Zero is full panic. 100 is full euphoria. CNN updates it daily.
As of writing this, it’s at 42 (up from 27 last week).
Figure 1: CNN, April 14th, 2026
The seven components are:
Market momentum — S&P 500 vs. its 125-day moving average
Stock price strength — 52-week highs vs. lows on the NYSE
Stock price breadth — advancing vs. declining volume
Put/call ratio — how much downside protection traders are buying
Junk bond demand — spread between investment-grade and high-yield debt
Market volatility — VIX level vs. its 50-day average
Safe haven demand — stock returns vs. bond returns
And while a useful gauge, it isn’t perfect.
For example, the index can sit at 10 - extreme fear - for three weeks before markets even find a floor. Thus, it tells you sentiment is very bearish. But it doesn't tell you when prices will stop falling or even rebound (nothing will).
So, what is it really good for? It gives you a single number that captures what the crowd is feeling right now - much easier to grasp than something like standard deviations.
The bottom line: The Fear & Greed Index is a starting point. Not a strategy. Use it to frame the conversation - then reach for tools with more data behind them.
Divide the total value of U.S. stocks (the Wilshire 5000) by U.S. GDP. The output is a percentage. The higher it is, the more overvalued the market is relative to the economy. And vice versa when it’s lower.
Buffett called it "probably the best single measure of where valuations stand" in a 2001 Fortune interview. Although, since then, he's walked it back a bit.
In a historical context, below 100% and the market is undervalued. Above 140–150%, you're in frothy territory. At 200%+, investors are essentially paying two dollars for every dollar of economic output (very pricey).
That gap closes one of two ways - markets fall, or the economy grows fast enough to catch up.
Where the indicator has stood at major inflection points:
Historical average: ~100%
Dot-com peak (2000): ~140%
Financial crisis bottom (March 2009): ~57%
COVID bottom (March 2020): ~125%
Early 2026 peak: ~230%
Current: ~211%
Figure 2: currentmarketvaluation.com, April 2026
The real limitation is structural.
As we previously detailed, S&P 500 companies earn roughly 40% of revenues overseas - none of that shows up in U.S. GDP. And interest rates change what investors will pay for future earnings. Meanwhile, there are trillions more dollars sloshing around in the system since the 2008 Fed easing truly started. Thus, a 230% reading today isn't the same animal as 140% in 2000.
The bottom line: The Buffett Indicator is a long-wave risk gauge to understand market valuations relative to the economy, but not a market timer. And at 200%+, the margin for error is thinner - but that doesn't mean stocks can't gohigher.
What the VIX Says About Market Fear
The VIX estimates how much the S&P 500 could move over the next 30 days, based on options prices. Higher readings mean bigger swings are priced in. They don’t tell you whether stocks will rise or fall.
But here's what most people miss.
The VIX historically moves in reflexive cycles.
High readings breed future calm. And low volatility breeds future risk.
180-day returns: 75% chance of positive returns, averaging 13.4%
360-day returns: Positive 100% of the time, averaging 35.3%
Fear spikes plant the seeds for recoveries.
The catch is the same as always - a VIX of 35 doesn't mean the selling is over. It just means turbulence is still priced in. The VIX works better as a condition than a trigger - not "buy now," but "the setup is entering a historically favorable area."
The bottom line: Volatility is cyclical. And the VIX tells you when fear is extreme – what you do with that information depends entirely on whether you built a framework before the spike arrived.
How DunhamDC Applies Rules-Based Investing
DunhamDC uses price movements and time-based rules to adjust equity exposure. It’s designed to increase stock exposure as markets fall and reduce it as markets rise, helping put a repeatable process behind the idea of buying fear and selling greed. It’s Buffett's wisdom turned into a repeatable process.
But why does that matter so much?
According to DALBAR's latest research6, the average investor consistently underperforms the funds they're actually invested in - not because they picked bad funds, but because they bought high and sold low at exactly the wrong moments.
Put simply, fear and greed drove the decisions. And the decisions cost them returns.
DunhamDC removes that emotional point entirely. Powered by the Dykmans Curve - created by Dunham President and CIO Ryan Dykmans - the strategy executes automatically:
When markets get overheated and greed takes over - equity exposure drops (sell into greed).
When prices fall and fear dominates - equity exposure increases (buy into fear).
No committee vote. No delayed trade. No 2 a.m. second-guessing.
A standard 60/40 portfolio might shift to as little as 33% stocks near a market peak and as much as 67% near a bottom.
It also helps mitigate one of the biggest threats retirees face - sequence risk.
A bad crash early in retirement - when withdrawals are already happening - can permanently derail a portfolio that never gets the chance to recover. By trimming into strength and buying into weakness, DunhamDC aims to reduce that danger without abandoning growth.
What it's built to fix:
Emotional mistakes — the algorithm doesn't panic, freeze, or chase momentum.
Sequence risk — selling into strength helps protect retirees from the worst-timed losses.
Recovery time — owning more stocks at lower prices means portfolios bounce back faster.
The advisor's job in this model isn't picking the bottom. It's building the framework before fear arrives - and having a clear, calm answer ready when clients ask, "so what are we doing about this?"
The bottom line: DunhamDC is the practical way to buy fear, sell greed.
What Berkshire’s Cash Position Can Tell Investors
Most people treat Berkshire Hathaway's earnings report as a footnote. But it offers more than that.
Buffett building cash = assets are fully priced, he sees more risk than opportunity
Buffett deploying cash = fear has discounted prices enough for him to act
That's it. No formula. No index. Just watching what he actually does with his money.
The problem is that most investors can't replicate the behavior even when they understand the signal. Holding cash underperforms in a bull market. For institutional managers, it creates career risk. For retail investors, it creates anxiety - watching a neighbor's portfolio climb while sitting in T-bills. And when markets finally crash, deploying that cash feels terrifying. Every instinct says wait while every headline says it's going lower.
That's exactly when the cash has to move.
During March 2020, institutions that were fully invested had no firepower when the window opened. The selloff lasted three weeks. Berkshire had the cash to buy while the fully invested were tapped out. Same with 2008.
The bottom line: Cash gives an investor the ability to act without first selling something else. But having cash and choosing when to use it are separate decisions. Berkshire’s balance sheet is a useful case study - not a buy-or-sell instruction for everyone else
Build the Plan Before Fear Arrives
Five tools. Five different ways to read fear and greed in real time - and actually act on it.
The CNN Fear & Greed Index shows you what the crowd is feeling.
The Buffett Indicator shows you how expensive the market is relative to the economy behind it.
The VIX tells you how much fear is priced into options markets right now.
DunhamDC removes the human from the decision entirely.
Berkshire's cash position shows you what the greatest investor of our time is actually doing with his money - not what he's saying.
Each tool measures a different dimension of the same market cycle. Used together, they give advisors and investors a real-time read on where fear and greed stand - and a framework for acting on it before everyone else figures it out.
Here's what they all have in common: none of them work without a plan built before fear arrives. The tools are useless if the framework doesn't exist when the moment comes.
Fear is powerful. Always has been. But the edge goes to whoever already decided what to do about it.
Frequently Asked Questions About Stock Market Fear and Greed
What does “be greedy when others are fearful” mean? It means being willing to consider investments when pessimism has pushed other investors away. It doesn’t mean buying every falling stock. Investors still need to assess value, financial strength, risk, and how much they can afford to invest before making a decision.
What’s the difference between the Fear & Greed Index and the VIX? CNN’s Fear & Greed Index combines seven market indicators into a sentiment score. The VIX focuses on expected S&P 500 volatility over the next 30 days. The VIX is also one component of CNN’s index, so the two measures overlap but measure different things.
Does a high VIX mean it’s time to buy stocks? No. A high VIX means options prices imply larger expected market swings. It doesn’t identify a bottom or guarantee a rebound. Investors can use it as context for a planned decision, rather than treating one reading as an automatic signal to buy.
Can the Buffett Indicator predict a market crash? No. The Buffett Indicator compares stock-market value with gross domestic product, or GDP. A high reading can raise concerns about stock valuations, but it doesn’t tell investors when prices will fall. How investors interpret the ratio also depends on the data and valuation framework used.
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance. All examples are hypothetical and are for illustrative purposes only.
Information contained in the materials included is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information. This document is provided for information purposes only and should not be considered as investment advice.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.
